Monday, July 13, 2009

Can it be business as usual ?

Goldman Sachs, is reporting its quarterly results tomorrow (Tuesday). There is rampant speculation that they will report “blowout profits” – something in excess of $2 bn in the quarter. Remember, not so long ago, they received money from the government to stay afloat and they repaid it back recently. They were also a beneficiary of the bailout of AIG – they had significant dues from AIG which would have all been a write off, but for the government bailout of AIG and them paying their creditors like Goldman Sachs.

Along with the speculation on results, there is the inevitable speculation on bonuses. Analysts are falling over themselves in predicting the size of the Goldman bonus pool.

There is no doubt that Goldman Sachs made all this money by taking significant risks and managing them better. Everybody else on Wall Street envies them. Many hate them for their success.

In some ways Goldman Sachs are in no man’s land. If they report poor results, the markets will kill them (remember their shares have risen by 68% this year). If they report fantastic results, surely the government, the public and everybody else is going to wonder, how is it possible to make huge profits just months after virtual meltdown.

To me, this is a signal that “business as usual” has reappeared far too soon. After what all has happened, it just cannot be allowed to be so. Where Goldman Sachs goes, surely others will follow. There will be increasing clamour for everybody to lay their hands off and to let them carry on as before.

If Goldman Sachs does indeed report the expected “blowout results” its an urgent wake up call for governments around the world to focus on how this industry will be run – what regulation, what structures, what they will be allowed to do and what they will not be allowed to do.

One thing is certain. The world cannot afford to let them carry on “business as usual”.